Download The Sharing Economy: What is the role of government?

The Sharing Economy: What is the role of
government?
Summary
To better understand the sharing economy and the role of government, the City of
Toronto, in partnership with MaRS Solutions Lab, hosted a 1-day forum at the Ismaili
Centre in Toronto on October 29th, 2015 for an audience of government staff and
decision makers from across Ontario.
The Forum served as an opportunity for governments to learn from experts and discuss
the key issues, challenges and opportunities for policy makers. The day featured
moderator-led panels on the Economic and Social Impacts of the sharing economy.
Guests also heard expert speakers, including April Rinne, Young Global Leader with the
World Economic Forum and Sunil Johal, Policy Director at the Mowat Centre. In the
afternoon, attendees were engaged in roundtable workshop discussions led by MaRS
Solutions Lab.
The morning provided an opportunity to frame the discussion on the sharing economy by
defining the sharing economy, identifying those who are affected, and discussing the
social and economic impacts.
While the concept of sharing products or services is not new, today's sharing economy is
largely enabled by technology. The sharing economy consists of marketplaces and
platforms that allow individuals and organizations to buy and sell goods and services
directly from one another instead of from traditional businesses, and share or lend goods
or assets on a short-term or time-share basis. The two main business models include
"collaborative consumption" based on individuals renting their assets to one another and
buying or transacting directly, bypassing traditional structures and “product-as-aservice,” where consumers can rent products rather than buy them, often from a
company that owns the asset. The sectors that are most affected by the sharing
economy include transportation, retail, accommodation, service and labour, and
finance and lending.
The sharing economy generates an estimated 15 billion USD worldwide and is projected
to grow to nearly 330 billion USD in ten years. There are "spin-off" economic impacts that
are less predictable – such as job displacement, job loss, and tax avoidance. These have
potential to result either in significant social and economic cost or value, depending, for
example, on how traditional businesses adapt, or on the strength of the regulatory
framework in place.
The advent and growth of the sharing economy presents challenges for regulators.
Existing regulatory frameworks have remained relatively static with prescriptive and rigid
structures that are slow to respond to rapid changes in the sharing economy, influenced
by consumer demand, technology, sharing economy services, and changing portable
business models. The result is a series of regulatory gaps that may seem unfair and have
social and economic impacts on sharing economy businesses, traditional industries,
consumers, and the general public.
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Regulatory Challenges and Opportunities: Panelist Comments

A lack of comparable insurance coverage between traditional businesses and
sharing economy businesses highlights a gap in regulatory requirements for
sufficient insurance in a changing business environment. Regulators need to
engage the insurance industry and provide clear direction on insurance
requirements in order to better guide providers and businesses in this area.

With individuals now able to move freely between being a consumer and a
service provider, the distinction between the two has become muddied.
Regulators need to define this distinction. This distinction will have implications for
Employment Insurance and the Canada Pension Plan.

In order to better capture applicable tax revenues, the above distinction needs
to be defined and taxes collected fairly. Regulators could seek to enable people
to pay taxes and do so with ease (e.g. through how-to tax compliance guide,
using technology for easy transactions).

The sharing economy can present an opportunity to grow the economy by
allowing both traditional businesses and sharing economy businesses to target
new consumers, cultivate new or innovative services and products, generate
new jobs, and increase spending. By increasing the size of the pie, the changing
business models allow access to those who would not otherwise be able to
participate within affected industries. For instance, 33% of Airbnb users say they
would not have taken a trip without Airbnb.

Businesses that employ private contractors can present new opportunities and
flexible work. While not necessarily the solution, the sharing economy presents
opportunities for the un- and underemployed in the traditional economy
(including those facing discrimination and a lack of access to good jobs), and for
entrepreneurs. For example, 80% of sellers on Etsy are women, 90% of whom work
from home and are able to contribute to the household income without
spending on workshop or office space. Government could explore a regulatory
role in providing this new type of contract/precarious worker with health benefits
and re-examining existing social supports to maximize the benefits from job
creation that results from the sharing economy.

Contract work in the sharing economy shares many characteristics with
precarious work in the traditional economy, and can have similar negative health
outcomes (e.g. income stress, lack of access to company health benefits). There
are, however, differences in the degree of choice and the quality of life between
contract workers and precarious workers. Regulators need to keep pace with
innovation in order to ensure workers are protected and to reduce any adverse
health impacts and inequities.
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
The sharing economy can have the benefit of fostering community, building
social capital, allowing access to underused goods and assets (including making
assets available to borrow, e.g. expensive tools, that may otherwise be
unaffordable), and reducing consumption. Community is built through
connecting people and creating a sense of belonging.

There are positive health benefits associated with community interactions. The
sharing economy creates platforms through which bonding and social
interactions can occur – this is primarily achieved through the sharing of
assets/collaborative consumption.
Addressing Issues; Leveraging Opportunities
In the afternoon, the Forum's focus turned to identifying the role of government and
finding solutions to the issues presented. According to public opinion research from
Leger, it's estimated that 85% of the Greater Toronto Area believe the growth of the
sharing economy is good for the economy, and 40% of young Ontarians are users of the
sharing economy because of affordability and convenience. This support suggests that
regulators need to be quick to address the challenges and embrace opportunities as this
segment of the economy, and its client base, will only grow in the months and years
ahead.
Effective regulation of the sharing economy must deal with the changing environment,
address public policy concerns, and reduce the burden of compliance, using simple
language that is easy to implement and comply with. Speakers suggested that
governments seek to understand the challenges from the user perspective, design
solutions from an 'empty box approach,' consult with different stakeholders, define public
value, design possible ways to create it, and pilot policies for monitoring and evaluation.
Internationally, the sharing economy has incited varied government reactions. While
some jurisdictions have been vehemently opposed to the sharing economy, other
places, like Seoul and Amsterdam, have enthusiastically embraced the concept of a
"sharing city". For instance, Seoul has adopted sharing economy as a tool for urban
planning and building community, investing in a dedicated staff team and public funds
in locally initiated sharing economies including car sharing and ride sharing initiatives.
Learning from international examples, there is an opportunity for Canadian municipal
governments to design flexible policies that also benefit them by leveraging the sharing
economy to meet city objectives (e.g. environmental, equity, community building, and
economic). This can be done through support for companies that emphasize community
building and inclusiveness, participating in the sharing economy (e.g. by "sharing"
underused municipally owned spaces), piloting policy changes or new programs to
measure benefits and community impact before officially making policy changes, and
helping grow local sharing economy projects (e.g. investments from public funds).
Conclusion
Technology tends to outpace regulation. To balance this, it is up to regulators to address
negative impacts that result from the changing nature of commerce by applying an
innovative policy lens. Flexible, forward thinking, and common sense policies and
programs will allow government to improve compliance in an ever-changing segment of
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the economy while also leveraging it for the social and economic benefits that can
advance society.
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